Elon Musk ignored warnings about the US securities disclosure obligations triggered by his stake in Twitter in 2022. A lawsuit says a Morgan executive helped Musk secretly amass shares in the social media firm.
Lawsuit accuses Musk of defrauding investors
The lawsuit claims Musk and his right-hand man Jared Birchall discussed the rule they have to disclose more than a 5% stake in Twitter. They cited testimonies from the two men. Musk and Birchall had to testify before the US Securities and Exchange Commission (SEC).
The amended lawsuit was filed by a Twitter investor in a Manhattan federal court. It accuses Musk of defrauding investors by delaying disclosure of his Twitter stake to amass shares at lower prices. The Oklahoma firefighters pension fund said Musk saved more than $200 million by adding to his Twitter stake in secret. This contributed to the detriment of some investors.
The lawsuit added Musk and Birchall enlisted the unidentified managing director at Morgan Stanley to develop a clandestine trading strategy to hide Musk’s Twitter stock acquisition. As a result, it allowed him to buy shares at “artificially depressed prices.”
Neither Musk nor Birchall were immediately available for comment.
Musk’s lawyers claim he did not knowingly defraud investors
The lawsuit says the Morgan Stanley executive repeatedly told Birchall to seek legal advice. Birchall told the executive lawyers had been consulted when that was not the case. This was not done until he had amassed over a 9% stake in Twitter on April 1, 2022.
Musk eventually bought Twitter for $44 billion in October 2022 and changed the company’s name to X.
Musk’s lawyers have argued that their client was “one of the busiest people on the planet.” Any disclosure failure was “inadvertent.”
The lawsuit said the violation “is the latest episode in Musk’s history of disregard for the federal securities laws and contempt for the SEC and its rules and regulations.”
Musk and the top US markets regulator have been in a years-long feud, dating back to 2018.
With inputs from Reuters
